NEW YORK, Feb 3 (Reuters) – Emerging markets were facing
headwinds going into 2014, but January’s rout surprised even the
gloomiest of investors, with big declines in stocks, bonds, and
Political turmoil and terrorism threats across market
capitals from Ankara to Kiev, along with growing concern about
bad debt in China’s shadow banking system, caused a full-scale
pullback across all risk assets.
Since April of last year, a small but growing cadre of lawyers, investors, regulators, and yes, even journalists, have been carrying around dog-eared copies of an International Monetary Fund paper (read: trial balloon) that revisits how the fund, the lender of last resort for many nations, might revamp its approach to sovereign debt restructurings.
The IMF prefaces its latest foray into sovereign restructurings by saying history shows official sector sovereign debt restructurings have been “too little too late” and when it gets involved, the public money used in a settlement too often just flows to private sector investors who take the cash out of the afflicted country.